AAHAR Exclusive

'We will offer many incentives to foreign companies'

The good news is that several foreign companies are interested in investing in the food processing sector. Better still is that the government wants to extend several tax and other incentives to them. Minister of food processing industries, Subodh Kant Sahay, in an exclusive with Praveen K Singh, talks about how he wants to revolutionise the food processing sector.

Subodh Kant Sahay Union Minister of Food Processing Industries

Research shows that only two per cent of the country's total agriculture/food produce is processed. How do you see this sector grow?

As per a study conducted by the National Council for Applied Economic Research, the Indian food processing industry has performed comparatively better during the Ninth Plan period. The sector attracted a total investment of over Rs 40,000 crore and had registered growth of over six per ent.

However, the sector is yet to make its mark in the global market. The ministry of food processing industries is the nodal agency of the government of India for processed foods and is responsible for developing a strong food processing sector with emphasis on stimulating demand for appropriate processed foods, achieving maximum value addition and by-product utilisation, creating increased job opportunities particularly in rural areas, enabling farmers to reap the benefits of modern technology, and creating surpluses for exports.

We are also concerned with the formulation and implementation of policies and plans for the food processing industries within the overall national priorities and objectives. We act as a catalyst and facilitator for attracting domestic and foreign investments towards developing large integrated processing capacities, by creating conducive policy environment, including rationalisation of taxes and duties. It processes applications for foreign collaborations, Export Oriented Units (EOUs) etc and assists/guides prospective entrepreneur.

In the post liberalisation, the ministry has approved a large number of joint ventures, foreign collaborations, industrial licenses and 100 per cent EOU proposals in different food processing areas and has taken major policy initiatives to facilitate growth in the industry.

With rampant adulteration, how do you plan to make Indian companies adhere to internationally-competitive quality and safety benchmarks?

The ministry has undertaken a series of awareness programmes among the industries, industry associations and Chamber of Commerce & Industries so that the Indian industry is fully geared to upgrade their standards to be in consonance with the standards set by the Codex Alimentarius Commission, which is the international body for setting quality standards. There is a high-power parliamentary committee, headed by Agriculture minister, Sharad Pawar, which has laid down stringent standards applicable to food and beverages industries for greater compliance and zero adulteration. The ministry also gives financial assistance to various industries to introduce quality assurance systems. Further, we are also giving financial assistance for setting up of quality testing laboratories so that the products of Indian Industry conform to the world standards. The ministry extends financial as well as training support to the sector for setting up quality labs in each state. We have already planned to add 100 more food testing laboratories to the existing 31, for which a large pool of qualified food technologists would be required.

We are also in process of setting up institutional arrangement for specification and for auditing of the various systems that are to be introduced by the various units so that processes the quality assurance system and the final products are all in confirmative with the standards prescribed by Codex Alimentarius Commission and are also comparable to other international standards.

What are the incentives provided to new entrepreneurs in the field of food processing?

Since liberalisation several policy measures have been taken with regard to regulation and control, fiscal policy, export and import, taxation, exchange and interest rate control, export promotion and incentives to high priority industries.

No industrial license is required for almost all of the food and agro-processing industries except for some items like beer, potable alcohol and wines, cane sugar, hydrogenated animal fats and oils etc, and items reserved for exclusive manufacture in the small scale sector. Items reserved for SSI include pickles and chutneys, bread, confectionery (excluding chocolate, toffees and chewing-gum etc.), rapeseed, mustard, sesame and groundnut oils (except solvent extracted), ground and processed spices other than spice oil and olioresins, sweetened cashew nut products, tapioca sago and tapioca flour. Up to a maximum of 24 per cent foreign equity is allowed in SSI sector.

Wide ranging fiscal policy changes have been introduced progressively. Excise and import duty rates have been reduced substantially. Many processed food items are totally exempt from excise duty. Custom duty rates have been substantially reduced on plant and equipments, as well as on raw materials and intermediates, especially for export production. Corporate taxes have been reduced and there is a shift towards market related interest rates. There are tax incentives for new manufacturing units for certain years, except for industries like beer, wine, aerated water using flavouring concentrates, confectionery, etc. As for export promotion, food processing industry is one of the thrust areas identified for exports. Free trade zones (FTZ) and export processing zones (EPZ) have been set up with all infrastructure. Also, setting up of 100 per cent EOU is encouraged in other areas. They may import free of duty all types of goods, including capital foods. Capital goods, including spares up to 20 per cent of the CIF value of the capital goods may be imported at a concessional rate of customs duty subject to certain export obligations under the EPCG scheme. Export linked duty free imports are also allowed.

How do you plan to attract foreign investment in the country?

The entire agro-food sector is undergoing a revolution in the country, and it is the exact time that the foreign companies should invest in the country in this emerging sector as the government is providing them a number of tax and other incentives.

The entire sector has been deregulated and no industrial license is required except in case alcoholic beverages and items reserved for small scale sector. Guaranteed approvals up to 100 per cent are permissible except in few cases. We have also proposed to set up 'Mega Food Processing Park' in each state to encourage foreign direct investment and investment from NRIs, and they would act as a Centre of Excellence. Also, a number of foreign companies have shown interest in setting up supply cold storage chain in the country.